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Introduction

Yone Minagawa, 114 years old and Tomoji Tanabe, 111 years old, are the oldest living individuals on earth as recorded by the Guiness Book of World Records. Both are now living in Japan, which has one of the world’s longest average life spans. This factor is often attributed to the Japanese’ healthy diet of fish and rice. Japan’s centenarian population has quadrupled in the past 10 years and is expected to reach nearly one million in 2050.

Population aging is a worldwide phenomenon. According to the 2005 Human Development Report, it is taking place worldwide except for 18 countries. Scholars say that approximately one in five persons will be aged 65 or over in the 21st century.

Rapidly aging population refers to the change in age distribution or age structure of a population toward older ages. An increase in the population’s median age, a decline in the proportion of the population composed of children and a rise in the number of elderly people are all aspects of population aging.

Population aging is progressing rapidly in many industrialized countries but developing countries are also experiencing rapid increases in their proportion of elderly people. This pattern is expected to continue over the next decades.

The elderly today have attained higher levels of education and economic position than their counterparts in the past. These factors including their rising number has made the elderly a major social and political force in the world. And because older populations are increasing on a global basis, the issues and problems associated with aging are worldwide.

This paper takes a look at the global phenomenon of rapidly aging population. It gives an overview of the recent trend in world demographics, what brings about population aging, its economic effects particularly on labor, what it means for the social security system particularly the health and pension sector and its impact on migration processes. Finally, this paper takes a look at the possible solutions to this issue and how interstate policies must be changed in order to reverse the process of population aging and impede its detrimental effects.

What causes population aging?

Population aging is a consequence of two important population processes: fertility decline or the lowering of birth rates and mortality decline at older ages.

Improved nutrition, sanitation, housing and health care combined to help promote longer lives for most people. Successes in preventing infectious diseases that benefit infants and young children is one factor in prolonging the lifespan at early ages. Mortality decline in older age groups, particularly among women has also been a dominant factor in the current aging. In general, economic development has accounted for the lower mortality rate.

Not only are more people now living to reach older ages, but birthrate has also been declining. John Stuart Mill, one of the early demographers believed that women empowerment has become important to population growth regulation. A number of women today are averse to the idea of having many children. Related to this is George Stolnitz’ idea that the demographic transition towards lower birth rates is closely linked to modernization. As societies modernize, family life is weakened by industrial and urban life. Another scholar, Kingsley Davis, however, believes that the desire to maintain one’s relative status in society is the most powerful motive for fertility limitation.

Of the two population processes, fertility decline is seen as the more dominant contributor to population aging.

Aging Populations Around the World

Demographers consider a population “young” if individuals under age 15 comprise more than 35% of the total number. On the other hand, a population is said to be “old” or “aged” if individuals 65 or older comprise more than about 10% of the total population.

Population aging is greatly felt in more developed countries today, but it is projected that the expansion of the world’s elderly population is going to be greatest in developing nations in the next decades.

Today, Western Europe has the highest percentage of elderly. The population of Europe is projected to slide over the coming decades and the decline will be rapid. For example, Germany, which is currently the largest country in the 27-member European Union, with over 80 million population, could find itself with just 25 million people at the end of the century, some estimates suggest.

Germany, Italy and Spain all have birthrates under 1.4 while other EU members like Slovakia, Slovenia, Lithuania, the Czech Republic and Poland have birthrates of below 1.3. Among the EU countries, only France and Ireland have positive birthrates. In 2006, Nicholas Eberstadt, a demographer at the American Enterprise Institute, announced that it was the first year when deaths exceeded births in Western Europe.

On the other hand, Asia has the older persons in terms of absolute numbers. It is also expected to show the greatest increases in both numbers and percentages of the elderly by 2025.

East Asia (China, North and South Korea and Japan) for example, has been recorded as one the most dynamic and vibrant region of the world since World War II, characterized by rapid economic growth and social progress. The region has also experienced demographic changes, characterized by improvements in life expectancy and fertility decline. Continued increases in age at marriage and an increase in female participation in economic activity could further lower the level of fertility in this region. Estimates by the United Nations indicate that the percentage of the population 65 years and older in East Asia will increase from about 10 percent in 2000 to 25 percent by 2050. This will occur simultaneously with a decline in the working age population from 70 to 60 percent of the total.

One compelling case of rapidly aging population is that of Japan. The aging of the population in Japan took place more rapidly than in any other nation in the late twentieth century owing to the fact that it has the highest overall life expectancy of any nation in the world. With only 10 percent of its population aged 5 and below in 1985, Japan will see its proportion of the elderly increase to 20.3 percent by 2025. Within the next 50 years, it is projected that Japan’s elderly will exceed one third of the total population, while those of working age will decline to one half.

China, on the other hand, is likely to age faster than any other country because of its large population. China, through its one child policy per married couple has greatly decreased birthrates through the 1970s and 1980s.

South Korean population has also undergone the aging process since the 1960s. Fertility decline was the most important factor in the early process of population aging. This is a result of the changing attitudes of women toward marriage, the rising age at which women get married and the rise in incidences of divorce. Around 2018, it is projected that the number o f aged in South Korea will surpass that of the youth population.

North Korea is also experiencing population aging although the degree is slightly behind that of South Korea.

Today, Japan and South Korea have already been experiencing labor shortages as a result of an aging population. China, on the other hand, still has an abundant labor supply and unemployment remains high. Although the long term trend for China and South Korea is similar to that of Japan, they will still continue to benefit from the expansion of the working age population for the next two to three decades.

Given this trend in world demographics towards older populations, the succeeding chapters shall discuss the impacts of an aging population with particular focus on the economy, the social security system, the health care sector and migration.

Aging Population, Labor Shortage and Other Economic Impacts

Japan, South Korea and China, during the next half-century, will move from a period of workforce expansion to significant workforce contraction. At the same time, their graying populations will require the shrinking workforce to shoulder the higher costs associated with the rapid aging of their populations.

In Japan, population will decline much sooner that will eventually result in a shrinking labor force as long as male-female participation rates in economic activity remain unchanged. Options such as increasing the retirement age would fail because new technologies demand a workforce that is both young and qualified. Unless Japanese women respond to the increased demand for labor, Japan will face more and more labor shortages. The current generation of young women in Japan however, is discouraged from seeking employment because they can rely in income transfers from their parents as well as inheritances to support them. Yet, this situation is likely to change radically in the future as savings diminish with the aging population. Japan may need to import millions of worker in the years ahead to fill gaps in the labor pool.

Europe also faces the problem of labor shortage. Because of population aging, EU member-states are projected to lose 60 million people from their workforce in 10 years. To date, there are more than one million unfilled jobs in Germany and Britain. Companies like Siemens, a German engineering giant and BT, the British telecommunications company are having trouble filling their job vacancies. Thus, during the recent World Economic Forum in Davos, Switzerland, there was a call to urge the European Union to let in skilled immigrants to fill the labor shortages that will continue to grow as the workforce in Europe declines.

One distinct feature of population aging is that females tend to live much longer than males worldwide. Males exceed female death rates at all ages and for the leading cases of death, such as heart disease, cancer, stroke, accidents and pneumonia. Women are sick more often although with less serious health concerns but outlive men who die sooner from more life-threatening diseases.

The result of this feminization of the elderly population is that these elderly women often do not have the means to support themselves without spousal support and become dependent on their families or on state benefits. Thus, some of them are living below the poverty line, particularly those in developing countries.

Another impact of an aging population is that it may contribute to deflationary trends and pressures. Land and real property prices could begin to fall, particularly in rural areas, as a result of contracting demand since older people are more likely to save money than to spend.

Aging Population and the Social Security System

When people become very old, they require a greater share of public services and in developed countries, the task of taking care of the elderly has generally shifted from being a family responsibility to being more of a state’s responsibility.

However, with the shrinking of the labor force that funds the social security system of state, elderly benefits are affected especially in regions like Europe where pension systems are still largely funded by taxes on labor. In the future, welfare systems will be more and more difficult to keep afloat.

In the United States, the relatively fewer children resulting from the Baby Boom generation born between 1946 and 1964 and is now passing into middle age will require more money to finance old-age benefits because of the smaller working population. It has been reported that the U.S. Social security system may face a profound crisis if no radical changes are enacted. Some of the possible solutions being discussed are cuts in benefits, tax increases, massive borrowing, lower cost-of-living adjustments, later retirement ages or a combination of these elements to sustain retirement programs such as Medicare and Social Security.

In South Korea, elderly only households have increased greatly since 1980, and will increase further as population aging continues. Many of their elderly are poor and ailing, but are not eligible for free medical care and income subsidies that is why enlarging employment opportunities for the elderly is often recommended to enhance their quality of life.

Private companies running pension systems will also find it difficult to ignore what the insurance industry calls “longevity risk” or the chance that pension funds may run short of money because people are living longer. Longevity risk is already challenging Britain’s corporate pensions as well as the pension systems in Japan, Italy and Germany where the general population is aging.

Aging Population and the Health Care System

In the past, the task of taking caring of the elderly has been delineated to family members. However, with increased urbanization, the decline of the extended family, the increasing costs of health and nursing care, the changing needs of the elderly and the significant increase in their number have all contributed to the shift in the responsibility from the family to the state. Already now we are seeing more elderly being sent to nursing homes. Some elderly people choose to retire and migrate in other countries like the Philippines, where health care is cheaper for them than in their own countries. An example would be a number Japanese who live in elderly homes in the Philippines. Canada and the U.S. are also some of the top destinations of trained caregivers from the Philippines.

Population aging poses a great challenge to the health care systems of states. As populations age, there will be greater incidences of disability, frailty, and chronic diseases such as Alzheimer’s disease, cancer, cardiovascular and cerebrovascular diseases and the like. These diseases, which often afflict the elderly, need special attention and therefore higher costs. Some experts already raised concerns that mankind may become a “global nursing home” in the near future.

The largest expenditure of many countries now is health care. Health care costs and other social service benefits will continue to skyrocket as a result of increased longevity and the increased demand for institutional care at a time when family members, the traditional caregivers, will be forced to seek outside employment. Governments will therefore be left with choices between raising taxes, changing the tax system from labor to consumption or reducing the state’s role in providing health care.

In retrospect, other countries that may be able to provide health care like the Philippines may benefit economically from taking care of foreign elderly.

Aging Population and Migration

One of the immediate solutions seen to delay the effects of population aging is immigration. In Canada and Europe, immigrants have slowed down the aging process because they tend to be younger and have more children.

Migration also corrects for labor market imbalances. Japan, for example, is already experiencing rapid population aging and a shrinking workforce that, in the absence of migration, could adversely affect its economic growth and consequently the provision of social security and health care services to its elderly. In order to correct the labor shortage, Japanese leaders are scrambling to boost birthrate and to get more women and elderly in the workforce. However, many Japanese are now realizing that foreigners must become a part of the solution.

Despite these factors, migration policies continue to be restrictive in Japan. Its 2 million registered foreigners, 1.57 percent of the population, are at a record high but minuscule compared with the United States’ 12 percent. There remains a spurring debate on whether Japan, who had close its shores to foreigners for two centuries, should now open up to more foreign workers. Few support throwing the doors wide open. Instead, they want highly-skilled workers, engineers, educators and health professionals, preferably with Japanese-language skills.

Japanese officials are so touchy about the subject of immigration that they even deny that the country has an immigration policy at all. They speak of “foreign workers” instead of “immigrants” who might one day demand and receive citizenship. Japanese Prime Minister Shinzo Abe has spoken vaguely of opening Japan’s doors to immigrants and authorities acknowledge they have not yet reached a consensus on this issue. What is apparent is that Japan is wary of emulating the large-scale immigration in the U.S. and it is also fearful of duplicating Germany’s problems with its guest workers who were welcomed when jobs were plentiful but are now suffering from unemployment. Perhaps, another reason why Japanese officials are not quite open to a more liberal immigration policy is that immigration in Japan does not have a happy history. The first wave of immigrants in modern times came a century or more ago from conquered lands in Korea and China, sometimes in chains as slaves. Those who are still in Japan, mostly Koreans and their descendants, are still suffering discrimination and isolation. During the Japanese economic boom in the late 1980s, labor shortage produced a change in visa laws to let in descendants of Japanese emigrants, some from Brazil but with Japanese lineage. However, these emigrants have continued to live in isolation and have failed to blend easily back into the Japanese society.

But despite these fears of opening Japan to more foreign workers, its failure to encourage migration will only bring about continued economic stagnation, if not rapid economic decline. Other solutions such as investment overseas or programs to resettle older persons abroad could provide only a temporary relief, because populations of many of the receiving countries like Thailand for example, will themselves begin to age soon and will be looking for investments abroad to keep their economies from contracting. Without increased migration, Japan will lose out on the benefits countries such as Canada and the United States have enjoyed–increased fertility rates and a stable, if not growing, workforce.

South Korea has also began to consider various new options for relaxing their migration controls-though it may fall short of granting residence and other rights, such as those given to migrants in the United Sates and Canada.

The United Nations Population Division issued a report in 2001 on the analysis of how much migration is needed in aging populations in order to make up for the population declines and the aging process. For this study, the United Nations population specialists selected ten countries and regions to use as case studies. In nine of the ten-case study countries and regions, it is assumed that fertility will rise moderately over the course of the next 50 years. The analysis showed how many migrants exactly would be required for each of the ten selected countries and regions just to maintain its population at the current size. The number of migrants needed would be very large.

On the other hand, there are also some scholars who think that immigration only provides temporary reprieve to the aging population and that it may do more good than harm on the receiving state. One scholar noted that the emigration of working-age adults even accelerates population aging, as it is observed now in some Caribbean nations. However, population aging in these countries is accelerated by the immigration of elderly retirees from other countries, and return migration of former emigrants who are above the average population age. Next we shall discuss some of the proposed solutions to population aging and the role of state and interstate processes in this global phenomenon.

What Needs to be Done and the Geopolitics of Population Aging

Population aging is indeed a global phenomenon as discussed in this paper and because of this, it requires international coordination of national and local actions. The United Nations and other international organizations have already developed recommendations intended to mitigate the adverse consequences of population aging. Their recommendations include “reorganization of social security system, changes in labor, immigration and family policies, promotion of active and healthy lifestyles, and more cooperation between the governments in resolving socioeconomic and political problems posed by population aging.”

On the reorganization of the social security system, it is imperative that the states are able to invest these funds properly so as to avoid losing the money needed by more elderly. In the Philippine setting for example, the Social Security System has been reportedly losing millions because of poor investments. For welfare states where pension funds are taken from taxes from labor, perhaps there should be a restructuring of the tax system, as mentioned earlier, from labor to consumption because of the shrinking workforce.

A person is “officially” old when he or she reaches the aged 65. This was chosen by the U.S. Social Security Administration in 1935 as the age of eligibility for old-age benefits. But except for this bureaucratic significance, being age 65 has no other particular relevance.

Charles Bowden and Alvin Burstein pointed out that the “myth that age necessarily involves an inability to produce is challenged by the numbers of second careers and examples of influence maintained by prominent individuals late into their lives.” They mentioned that both Ronald Reagan and George Bush were elected president of the United States while in their sixties while most members of the US Supreme Court and many members of Congress are already in old age but still serve in office.

Changes in labor would include a restructuring of the working age. On a positive note, elderly people are healthier now because more recent generations have a lower disease load. They can now live vigorous and active lives until a much later age than in the past and if they’re encouraged to be productive, elderly people can be economic contributors as well. The current intensive biomedical anti-aging studies may also help to extend the healthy and productive period of human life in the future.

The analysis of the United Nations population division in 2001 even went on to estimate how much the working ages would have to be raised beyond the conventional 65 to make up for low fertility and population aging in ten case-study countries. The study showed that the upper limit of the working ages would have to be raised to between 72 and 82 if the ten case-study countries were to admit no migrants over the first half of the twenty-first century. In Germany, Italy, Japan and the Republic of Korea, the working age would have to be extended to over 75. However if these countries were to admit enough migrants then the working age could extend to somewhere between 67 and 75.

Because the elderly are living longer while staying productive, work roles may change in which the aged are encouraged to remain longer in the work force because of a smaller population of younger workers. It would help if they are given the chance to choose whether to retire at the age of 65 or to continue to work but with added benefits.
Another change needed in the labor force is the increased involvement of women in countries who have been used to keeping women inside the home like the case of Japan and Korea. It has been said that the Japanese workforce would likely shrink by as much as a third by 2050 if more women and elderly workers are not hired.

Rigid immigration policies of states must also be rethinked especially in regions like Europe where politicians face an unusual task of finding workers for their companies while remaining hostile to immigration. As mentioned earlier, executives who gathered in Davos, Switzerland for the World Economic Forum are already urging this politically unpopular solution to let skilled immigrants fill the labor shortages.

David Arkless, head of corporate affairs at Manpower, a European employment firm, said that restriction on immigration flows in many European countries hampered companies from being able to match demand for skilled workers with vacancies. Immigration flows have declined in several European countries over the past decade, including Germany and Denmark. There are around 687,000 open jobs in Germany and closed borders, so there is no inclination to fill them
with immigrants.

Arkless added that the reason for the strict immigration policies is that politicians do not get reelected by encouraging immigration. The anti-immigration argument has been that immigrants only come to Western Europe to take advantage of its generous social benefits. What they do not see, however, is that immigrants are actually needed in the active labor force to keep the welfare systems afloat.

Lisa Anderson, dean of the School of International and Public Affairs at Columbia University, points out those so far European voters are reluctant to embrace either of the two options that could help hamper the effects of population aging and therefore bolster the EU’s economic might in the world: more liberal immigration rules and Turkey’s membership in the European Union.

One significance of Turkey’s membership in the EU is that it expected to increase its numbers of skilled workers over the next two decades, so is another nearby country, Egypt. Turkey and Egypt could be the new labor pool of Europe in the next two decades. If Turkey becomes a member of EU, the region will benefit much from Turkey’s manpower but until today, the EU has been giving a lot of conditions, giving the impression that it is not ready to fully accept Turkey as its member.

Countries in the European Union have already benefited from opening their borders to migrants from neighboring countries since it is the first region in the world to have created an international zone in which labor is allowed to move freely. However, the EU must be willing to take further steps to loosen its immigration policies.

This also resonates true to other regions in the world like Asia in order to have a freer movement of labor. The conundrum in an increasingly globalized world is that while the advance of the market economy has led to a gradual liberalization of goods and capital, the movement of labor has remained restricted.

One sector that would benefit much from less strict immigration policies is the health care sector. Today, we are already seeing caregivers, nurses, doctors and other health workers migrating and working in aging populations like Canada and the U.K. In the future, we will also be seeing a freer movement of older people in countries who can offer cheaper yet quality health care like the Philippines.

Another factor affected by population aging is the relationship between states. In Korea for example, North Korea might be a crucial factor in drawing a demographic picture for the future of both South and North Korea. Changes in North-South relations would alter the population situation including labor market conditions in both countries. It is important therefore for both countries to consider improving their relationship since both are already experiencing rapid population aging especially in their workforce.

China’s relationship with other countries is also changing. Japan’s power as an economic giant in Asia is now shifting to China because of rapid population aging. Although China’s population is also aging, it will still benefit from its huge population for several decades and will continue to do so if it does efforts to curb population aging.

To reverse the process of population aging, there is a need for state policies that would encourage more child births by giving incentives. One factor in the increasing number of children in France is its generous social legislation. Women are giving long maternity leaves, with assured return to work with posts and seniority intact. France also has a 35-hour workweek. Some say this is the reason why the French have so much leisure now that they have found nothing more interesting to do with it than have babies, combining fun with demographic patriotism. In Germany allowances for parents has been introduced to encourage child birth. Britain has introduced the same measure in 2001 and last year Britain had its highest birthrate in the last 13 years.

Conclusion

Age is one of the most important demographic variables in development planning. It provides the basis for estimating the school-going age, the dependent population, the employable population and the elderly. Because of this, population aging and its impacts on labor and economy, social security and pension system, health care system, migration and the relationship between states cannot just be ignored. There is a need therefore to change the way we do things in the national, regional and international level.

The responsibility of taking care of the elderly has already shifted from the family to the state or society. On the national level, various nations will be increasingly concerned with old-age policy. Efforts to hold down the cost of health care and pensions for the elderly are not likely to be successful as the aged population expands. Instead, states will more or less be required to expand and improve their health and social services for old people. States must be able to come up with methods to increase revenues significantly in order to support the growing number of aged because although the elderly are headed toward a more positive life situation in the future, as compared with past generations of old people, their large numbers will require considerably more resources than previously. Aging states must also change their population policies to correct this demographic trend.

In the regional level, there must be increased coordination and cooperation in terms of labor migration and health care services. Changing how people view immigrants is very important because right now some individuals think that immigrants would only like to take advantage of the “good life” in welfare states. Removing biases like this may be the only way to save their economies.

In the international level, there is a need to raise awareness on the issue of population aging and its impacts. It becomes an international issue because it changes the course of the relationship between states and how the concept of citizenship is viewed.

On the individual level, there is a need for us to change how we view elderly people from being a totally dependent population to being productive as well. Older people today are markedly different from the aged of previous generations. They are more healthy, alert, vigorous, and younger in outlook. They are also better educated and more affluent than in the past. In modern societies, it is typically only after the age of 75 that most people begin to decline physically. Some decline mentally while others remain relatively healthy past the age of 75.

Because of these factors and their large numbers the elderly can now have increased political power and influence. This means that they will have the clout to bring about legislation for public services to meet their needs.

Finally, the consequences of population aging may not yet be widely felt in developing countries like the Philippines but patterns are already showing a shift towards aging especially because a number of our working population are choosing to work abroad. Thus, we must be well-informed ready to take on the challenges of population aging in the future.

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http://www.un.org/esa/population/publications/ageing/ageing2006table.xls